Avoiding 60% tax bracket - before end of tax year

[tapandunwrap]

Missed the chance to sacrifice into pension. Any other last minute ways to avoid the 60% tax band if salary sacrifice pension isn't possible?

Edited by tapandunwrap on Saturday 27th March 23:31

[RizzoTheRat]

You should still have time to set up a private pension and put a chunk in to that. Mine's with Aviva and was really quick to set up a few years back.
I assume you'll need to self assess to get the tax back though.

[Mr Pointy]

Look at the IM sticky at the top of this forum & consider giving Nik a call.

[fat80b]

As you have a pension, then make an additional payment into it - that is what I have done in the past.

[bogie]

If you already have a pension, why not just pay an extra payment into it ? does not have to be salary sacrificed you can claim the tax back via tax return or just writing a letter to HMRC tax office.

[CaptainSlow]

You can only claim back to 40%, you need to do via work scheme to get the full benefit.

[BurtonLazars]

What is a 60% tax bracket?

[silentbrown]

CaptainSlow said:

You can only claim back to 40%, you need to do via work scheme to get the full benefit.

That doesn't sound right to me. Any pension contribution just comes straight off your taxable income, doesn't matter if company scheme or private.

Company scheme is rather better due to NI treatment, though.

If you're the charitable sort, consider a gift aid donation. Charity gets 20% above what you gift, 60% taxpayer gets the remaining 40% back...

[CaptainSlow]

silentbrown said:

CaptainSlow said:

You can only claim back to 40%, you need to do via work scheme to get the full benefit.

That doesn't sound right to me. Any pension contribution just comes straight off your taxable income, doesn't matter if company scheme or private.

Company scheme is rather better due to NI treatment, though.

If you're the charitable sort, consider a gift aid donation. Charity gets 20% above what you gift, 60% taxpayer gets the remaining 40% back...

I was assuming the personal pension was where you pay out of taxed income and make a claim for a refund via tax return eg

Pay in £80 out of taxed income, pension provider claims £20 and adds to the pot, you then claim back £20 from taxman.

[CaptainSlow]

BurtonLazars said:

What is a 60% tax bracket?

Effective marginal rate at £100k to £125k as you lose £1 of pa for every £2 earnt over £100k.

[Scolmore]

BurtonLazars said:

What is a 60% tax bracket?

Where you not only pay 'enhanced' income tax but also lose the equivalent in personal allowance

[beedj]

BurtonLazars said:

What is a 60% tax bracket?

For every £2 earned over £100k, you lose £1 of your personal allowance, until £125k when you're left with zero personal allowance - meaning an effective tax rate of 60% for that £25k. Then back to 40% for £125k - £150k, then 45% for anything above £150k

[BurtonLazars]

Ah yes, I see, thanks chaps. Not fun.

[isleofthorns]

CaptainSlow said:

Effective marginal rate at £100k to £125k as you lose £1 of pa for every £2 earnt over £100k.

still can't understand why this tax trap doesn't get more scrutiny and public challenge.... whilst it affects everyone over 100k.. it's only becomes less relevant when you earn significantly more than the 125k upper level. I think it's a disincentve to work harder if you're approaching the 100k level, and I reckon they'd end up taking more tax if they scrapped this

[Jiebo]

isleofthorns said:

still can't understand why this tax trap doesn't get more scrutiny and public challenge.... whilst it affects everyone over 100k.. it's only becomes less relevant when you earn significantly more than the 125k upper level. I think it's a disincentve to work harder if you're approaching the 100k level, and I reckon they'd end up taking more tax if they scrapped this

Because as you get into these income levels you are universally considered as banker scum everywhere in the country outside of London, despite it being a relatively common wage for a lot of low/mid-senior level professionals.

There isn’t much sympathy for people in these brackets, and therefore the populist government doesn’t care.

[anonymous-user]

isleofthorns said:

still can't understand why this tax trap doesn't get more scrutiny and public challenge....

And it's only going to get worse. Rishi Sunak's announcement in the recent budget that he's not increasing taxes but freezing the tax bands from 2022 to 2026 will have the insidious effect of "band creep". In other words, inflation will push more and more people into the 40%, 60% and 45% tax rate bands with zero increase in their real, inflation-adjusted earnings. It's reckoned that 800,000 people will find themselves drifting into higher tax bands.
https://www.thesun.co.uk/money/14230075/income-tax...

[RizzoTheRat]

Jiebo said:

There isn’t much sympathy for people in these brackets, and therefore the populist government doesn’t care.

A few more years of pay rises for MPs and I bet they'll suddenly start to care about it.

[SunsetZed]

Jiebo said:

isleofthorns said:

still can't understand why this tax trap doesn't get more scrutiny and public challenge.... whilst it affects everyone over 100k.. it's only becomes less relevant when you earn significantly more than the 125k upper level. I think it's a disincentve to work harder if you're approaching the 100k level, and I reckon they'd end up taking more tax if they scrapped this

Because as you get into these income levels you are universally considered as banker scum everywhere in the country outside of London, despite it being a relatively common wage for a lot of low/mid-senior level professionals.

There isn’t much sympathy for people in these brackets, and therefore the populist government doesn’t care.

Agreed but surely a clever chancellor would find a solution like reducing the 45% threshold lower and keeping the personal allowance or something along those lines so that it flattened the bump. Reducing the 45% limit to start at a lower amount, say 90k, whilst actually not making people earning over people pay more should be an easy sell to the public as the only people who earn 90-100k would lose out and they won't get much sympathy in the media. Those earning less will be happy that the rich pay more tax, those earning more will be happy as the bump will be flattened and the chancellor should take more money now as people won't be throwing it into pensions to avoid the 60% tax.

[supersport]

If you are in the 45% bracket then the thresholds have no more meaning as your tax allowance is long gone.

Personally I would rather this than messing with CGT or Pensions.

I accept we have to pay more tax, not only to pay for the pandemic, but a better NHS, education, sanitation, roads .... This way we all contribute a bit which has to better and more sustainable.

[anonymous-user]

The oddity and illogicality of relying on band creep is that it’s not saying “we must all pay for the pandemic” - it’s saying “those people who currently happen to have an income just under £50k or just under £100k must pay an extra 20% income tax on their top slice to pay for the pandemic”.

I liked the comment above that “a couple more pay rises for MPs and they’ll suddenly decide to care about it”!